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GST Collection on Low Value Goods
Goods bought from overseas sellers and imported to Australia worth less than $1000 are currently GST exempt, but Treasurer Scott Morrison wants to apply the 10% tax to all sales from July 1 this year.

The on-line retailers on Friday 21st April appeared before the Senate Economics Legislation Committee. They told the inquiry that while they were in favour of low value goods under $1000 attracting GST – a vendor based model of collecting the tax rather than using agencies like Australia Post to collect it – was too difficult to comply with and near impossible to enforce. No one was putting their hand up to be the collection agent and the legislation was criticised for its lack of detail, endless loopholes and unanswered questions.

The Conference of Asia Pacific Express Carriers (CAPEC), representing DHL, Fedex, UPS and TNT, also supported the vendor collection model rejecting the viability of the logistics collection model. CAPEC stated they collectively receive on average a staggering 34,000 low value consignments per day. Based on this data it would be a massive undertaking to collect the necessary consignment data, physically complete import declarations and collect the GST from end consumers to meet existing volumes, let alone the projected growth of online transactions.

KPMG has completed modelling that suggests the government could collect about $930 million by 2019-20 by applying GST on goods bought by households from overseas valued at less than $1000, but since there would be some non-compliance , the actual tax collected would be closer to $630 million if the same “logistics model” was adopted as the collection mechanism. KPMG assumes there will be at least 30% non-compliance among foreign retailers.

The question was asked as to whether the Integrated Cargo System (used to report the movement and clearance of goods across the Australian border) could handle the increase in import declaration volumes and highlighted the risk that this poses to the entire international trade sector should the statutory reporting system come to a grinding halt as it did back in 2005.

The Senate Committee was urged to contact the Department of Immigration and Border Protection and seek an absolute guarantee that the Integrated Cargo System (ICS) could deal with the projected increase in transactions. If there is any doubt about the ICS capability to cope, then it rules out the logistics collection model. Alternatively, an option would be to rebuild the ICS system or build a parallel system which would be able to cope with high volume low value transactions. Whether or not the government would be willing to invest in further technology would be a completely different matter.

Labor has heard the concerns highlighted in Friday’s media release with calls from industry representatives and CAPEC for a 12-month delay to provide the necessary time to implement the government's proposed vendor collection model.

They hope with more time and further industry engagement, all parties can come together and develop some innovative solutions to set a global benchmark in dealing with this complex issue. However, there is no doubt that compromise will be required from traditional retail, e-commerce, logistics and the government to provide a feasible solution for all.